Washington, D.C., United States (AHN) – More Americans continue to save in banks rather than borrow money from financial institutions. According to latest data from the Federal Reserve, savings in U.S. banks hit a record $1.45 trillion in May.

The growing savings has been observed since the global financial crisis in 2008.

A similar trend was observed in Japan, where the gap between savings and borrowing is at an all-time high.

Japanese banks use the money to purchase bonds to help keep yields the lowest in the world even if Tokyo has more outstanding debts than the U.S. and a lower credit rating.

Before 2008, U.S. deposits exceeded loans at an average of $100 billion.

Because of the worst recession experienced in the U.S. since the 1930s, consumers trimmed household debt to $13.3 trillion from the 2008 peak of $13.9 trillion. The reduction resulted in savings going up 4.9 percent of income from 1.7 percent in 2007.

For the same period, banks reduced lending amid over $2 trillion in losses and writedowns. Rather than grant more loans, American financial institutions instead bought Treasuries and government-related debt, which boosted their holding of such instruments to $1.68 trillion from $1.08 trillion in early 2008.

Economists forecast it would take the U.S. and Japanese economies at least a decade to extricate themselves from the mess of being a debt-ridden society.

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Americans continue to pay down revolving debt balances after all, as pessimism may be curbing consumer credit growth

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Washington, D.C., United States (AHN) – The Obama administration has found an unexpected ally in a ratings agency in the White House’s battle with Republican legislators over spending cuts and hiking the federal debt limit. On Thursday, Moody’s warned that it may downgrade Washington’s credit rating if the U.S. debt ceiling is not hiked soon.

Moody’s said that the U.S. credit rating could downgraded because of a very small, but increasing risk of a short-lived default, which would likely translate into higher interest rates at a time when the country’s recovery is again on the slow lane.

The ratings agency anticipated there would be a political battle between the Obama administration and Republican legislators before the debt ceiling would be lifted, but Moody’s said that it failed to consider the worsening conflicting positions between the two parties. Washington wanted to raise the debt limit to $16.7 trillion from the current $14.3 trillion, but with no major spending cuts.

Moody’s warning came on the heels of a lower outlook by Standard & Poor’s of the AAA U.S. debt rating to negative from stable because of the political wrangling.

The House voted on Tuesday not to hike the federal debt limit without major spending cuts. At the Wednesday White House meeting of Republican legislators with U.S. President Barack Obama, the legislators asked the administration for a detailed plan on budget cuts to solve the impasse.

House Speaker John Boehner justified the lower house’s refusal to give in to Obama’s request because raising the debt limit beyond spending cuts would cost jobs for Americans. Obama, however, warned that failure to hike the debt limit soon would lead to dire consequences for the fragile, but recovering U.S. economy.

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Washington, D.C., United States (AHN) – The Republican-dominated U.S. House of Representatives, as expected, rejected a proposal to increase the federal debt limit without budget cuts on Tuesday.

On a 318-97 vote, the House turned down a proposal from the Obama administration to increase Washington’s debt limit to $16.7 trillion from the current $14.3 trillion.

All Republican legislators voted against the measure that would have hiked the federal debt limit to an amount enough to cover government bills until the end of 2012.

In rejecting the measure, the GOP said they would push for sharp spending cuts and binding budget process reforms, House Majority Leader Eric Cantor said.

Cantor cited survey results that majority of American voters do not favor increasing the debt limit without spending cuts. The legislator said American families and businesses want the federal government to live like the rest of the country does – that is to tighten their belts and step relying on credit.

Even some Democrats voted against the measure after some party members criticized the bill as a Republic political strategy because the Republic leaders brought the bill to a vote and then asked caucus members to vote against it.

The defeat of the measure was imminent despite the warning by the U.S. Treasury Department that the U.S. faces defaulting on its debt if Congress does not allow the federal government to borrow more by August.

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As U.S. student debt has now passed the amount of credit card debt, and the intellectual returns of U.S. college are coming under fire [Jan 18, 2011: Report - First Two Years of College Show Small Academic Gains], grads are also being pressured on the job front. Some quite startling data in th.

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Washington, D.C., United States (AHN) – U.S. House Speaker John Boehner acknowledged on Monday that Washington needs to raise its debt limit. He made the admission on a radio interview on the day that the U.S. federal government reached its $14.3 trillion debt limit.

Boehner said Congress, at some point, will have to hike the debt ceiling but will do it in a way that would address the country’s long-term fiscal challenges. House Republicans favored combining $2 trillion spending cuts and no tax hikes to support a higher debt limit.

Treasury Secretary Timothy Geithner said on Monday that because Washington reached the debt ceiling on May 16, he would suspend investments in federal retirement funds until Aug. 2 while Washington continues borrowing in the debt markets.

Geithner assured federal retirees and employees that the measure would not affect their pensions because the funds will be made whole once Washington’s debt limit is increased. The secretary asked Congress to hike the legal borrowing limit to protect the full faith and credit of the U.S. and avoid consequences on Americans.

Boehner said that while he agreed with President Barack Obama’s call to raise the debt ceiling, raising it without dealing with the problem would be an irresponsible move on the part of Congress.

Obama favored a tax hike along with the increase in debt ceiling. But the president resisted making cuts in some areas such as medical research, infrastructure or college loans for needy students.

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NRCC – While House Speaker John Boehner announced Monday that House Republicans would seek responsible spending cuts to accompany any increase in the nation’s debt limit, Democrats continued to press for a new credit card to continue spending and borrowing from countries like China: Read more »

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Washington, DC, United States (AHN) – The House oversight and investigations subcommittee of the House Financial Services Committee is investigating the discussions made by Treasury officials with Standard & Poor’s prior to the rating agency’s downgrade of the U.S. debt to negative last week.

Rep. Randy Neugebauer, chairman of the subcommittee, said the officials may have exerted too much pressure on S&P. He sought documents regarding the meetings.

Neugebauer pointed out in a letter to Treasury Secretary Timothy Geithner that while it is common for companies and governments to push back when they don’t agree with a rating agency’s decision, there is a question of propriety since government has regulatory and oversight functions over the rating agencies also.

S&P, before downgrading the U.S. rating, informed Washington that the country risks losing its AAA credit rating unless policy makers agree on a deficit and debt reduction plan by 2013.

It was the first time for the U.S. credit outlook to be questioned since 1995 and 1996. At that time there was a disagreement between President Bill Clinton and House Speaker Newt Gingrich, which led to government shutdowns. Fitch placed the U.S. debt rating on negative watch from November 1995 to spring 1996, while Moody’s placed some U.S. government bonds on review for a possible downgrade in January 1996.

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Washington, D.C., United States (AHN) – Concern and criticism are rising from abroad as difficulties of the U.S. government in controlling its debt threaten international markets.

So far this week, the Russian prime minister accused U.S. economic planners of “hooliganism” and the chief economist for the International Monetary Fund criticized Congress for lacking a “credible” plan for escaping more than $14 trillion in debt.

On Tuesday, China urged the U.S. government to take “responsible” steps to control its debt. China owns more U.S. debt than any other country.

On Monday, the credit rating service Standard & Poors downgraded the U.S. government’s credit from stable to negative.

Meanwhile, Republicans and Democrats are fighting over whether to raise the nation’s debt ceiling.

The debt ceiling refers to the highest amount of debt the U.S. government can assume under the law.

At the current rate, the U.S. government will reach its $14.3 trillion debt ceiling on May 16, according to the U.S. Treasury.

Republican leaders said again Thursday they will agree to raise the debt ceiling only if they get guarantees of drastic spending cuts for the federal budget.

Democrats are reluctant to make cuts to programs such as Medicare and Social Security, which they say are vital to many households.

The unresolved dispute prompted International Monetary Fund Chief Economist Olivier Blanchard to tell the French magazine Le Monde, “There are reasons to be worried.”

“The United States lacks a credible plan, for the medium term, to reduce its budget deficit,” Blanchard said in the magazine interview.

“The ideological gap is huge between Democrats and Republicans on how to deal with the problem,” Blanchard said.

An International Monetary Fund report last week said U.S. debt could reach 100 percent of its gross domestic product by 2015 without drastic budget cutbacks.

Even harsher criticism came from Russian Prime Minister Vladimir Putin, who said during his annual address to parliament that “everything is not so good for our friends in the States.”

The U.S. economy is teetering as a result of a huge trade imbalance between imports and exports and growing annual budget deficits, he said.

Russia does not “have the luxury for such hooliganism,” Putin said.

He also accused the United States of flooding international markets with cash that lacks value because of the high debt.

The Treasury Department is buying back $600 billion in government securities in an effort to pump up the value of the dollar.

Mexican economists say the U.S. government’s inability to control its debt will result in increased cash flow into Mexico, an appreciation in the value of the peso, volatility in its stock market and higher unemployment.

Mexico’s economic trends are closely tied to the U.S. economy.

Gabriel Perez del Peral, an American University economist, said an increased value for the peso would slow Mexico’s exports.

“The change in perspective for U.S. debt will generate a greater appreciation of currencies for emerging markets and will complicate unemployment,” Perez told the Mexican news media.

He urged the Bank of Mexico to adopt cautious policies to protect the value of the country’s currency.

“The peso’s appreciation will generate greater unemployment and the economy will overheat, which will increase commodity prices,” Perez said.

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Lisbon, Portugal (AHN) – Ratings agency Moody’s has downgraded the credit worthiness of the Portuguese government for the second time in two weeks and warned further cuts might come.

Moody’s downgraded Portugal one bracket to a Baa1 rating from A3. Pushing Portugal’s long-term debt down toward junk bond status will make it more difficult and expensive for the country to borrow money, as it is a more risky investment now.

Uncertainty over Portugal’s government was cited by Moody’s. Among those were the possibility of debt restructuring, outstanding government debt and problems achieving deficit reduction, as well as the possibility the country might request a bailout.

This latest credit rating downgrade comes ahead a monetary policy meeting of the Governing Council of the European Central Council on Thursday.

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